How to Switch A Credit Card From Secured/Unsecured

How to Switch A Credit Card From Secured/Unsecured

Posted on June 17, 2021

Using a secured credit card is one of the many ways we recommend for rebuilding credit. If you cannot qualify for a standard card with a sensible rate, secured credit cards are the next best thing. But what comes next? How can you switch a credit card from one type to another, and when is the best time to do it?

Our Puslinch auto loan team explains how this credit building process works.

Credit cards and credit scores

We will often recommend using a credit card to help rebuild credit. They are an accessible way to build a positive payment history and increase your credit mix.

Used sensibly and paid off in full each month, they are also a cheap form of credit. Things only become expensive when you get out of the habit of settling them each month!

Secured credit cards

Secured credit cards are ideal for those with bad credit. They use a deposit system where you put down a cash amount equal to the credit limit. You pay it off as usual but if you miss a payment, it is taken out of that deposit.

Many secured cards will make notes on your credit report, including payments. This makes them useful in rebuilding credit.

When to switch from secured to unsecured credit cards

The timing of the switch depends on your credit score but as a general rule, we suggest using the card for 12-18 months before trying to switch.

As long as you have made every payment on time and nothing else has happened, you should a significant jump in your credit score. This should be enough to qualify you for a standard credit card.

Look for a card with low or no fees

Check the market for a credit card with no fees, or very low fees. There are lots of them around. Check national banks, check credit card companies and check comparison websites.

Select a card with no fees and a reasonable interest rate.

Prequalify for the card if you can

Some credit card companies offer a prequalification check before you apply like when you prequalify for an auto loan. They don’t usually impact your credit score so may be worth checking.

Check the small print on the card company’s website to check qualifying criteria and any guidance on credit scores. Factor that into the equation.

Apply for the credit card

If you think you’ll qualify for the card, apply for it. This will involve a hard inquiry on your credit report but as long as you only do it once, you should be fine.

As long as you checked before applying, you should qualify for the card, even it comes with a lower credit limit.

Once you have the card, you’re good to cancel your secured card.

Close the secured credit card account

Once you have your new credit card in hand, close the secured credit card account. Make sure all your payments are up to date, call the company and request to close the account.

You may have to wait a little while for your deposit to be refunded as the company will need to wait for any outstanding charges on the card.

That’s it! That’s all you really need to know about switching from a secured credit card to a standard card.

Contact Unique Chrysler for help, advice and competitive Georgetown car finance and leasing.

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